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Hong Kong protests
Economy

Hong Kong democracy act and future of ‘one country, two systems’ worry investors as city reels from protests

  • The Hong Kong Human Rights and Democracy Act needs to be signed by US President Donald Trump to become law after it was passed by the US Senate
  • The ‘one country, two systems’ policy guarantees Hong Kong a high degree of autonomy under the city’s mini-constitution, the Basic Law

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The Hong Kong Human Rights and Democracy Act could pave the way for diplomatic action and economic sanctions against Hong Kong. Photo: Felix Wong
Finbarr Berminghamin Brussels

Investors are closely watching the progression of the Hong Kong Human Rights and Democracy Act in Washington, for fear that it will further sharpen the risk of making investments in the city.

For the moment, the city remains the primary offshore hub for those wanting to do business in mainland China despite over five months of disruptions caused by anti-government protests, with the main damage thus far to sentiment rather than material loss of earnings.

But equally unanimous is the feeling that with the pace of the escalation in Hong Kong’s situation in recent months, this could very change quickly, with the bill that could pave the way for diplomatic action and economic sanctions against the city’s government adding to the pressure.

For many, the act, which was passed by the US Senate on Tuesday, is just the latest in a long line of issues to have damaged the city’s risk profile over the past six months, adding to a complex and uncertain picture, almost a parallel reality to Hong Kong’s erstwhile image as a stable, secure trade and financial hub.

“If you’ve got more business in India or Japan, then you may look to put some headcount in Singapore or Tokyo,” said one banker. “But at this stage, most are only scouting for office space.”

But the application of the “one country, two systems” framework for China’s relations with Hong Kong, and Washington’s treatment of Hong Kong as an independent entity, the city’s status as a beachhead for investment in mainland China is far from guaranteed in the long-term.

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